the state of digital microfinance in bangladesh · the state of digital microfinance in bangladesh...

THE STATE OF DIGITALMICROFINANCE INBANGLADESH

A DIGITIZATION SNAPSHOT | 2019

This report was produced and published by LightCastle Partners with

support from the Bill & Melinda Gates Foundation

TABLE OF CONTENTS

Executive summary ..................................................................................................................................................................

The microfinance industry at a glance ..............................................................................................................................

Current transaction digitization levels of MFIs in Bangladesh ...............................................................................

Reasons why MFIs are digitizing - benefits and opportunities ................................................................................

Challenges associated with the process ..........................................................................................................................

Recommendations for the industry ...................................................................................................................................

Conclusion ...................................................................................................................................................................................

Methodology ..............................................................................................................................................................................

Endnotes .......................................................................................................................................................................................

Acknowledgements ..................................................................................................................................................................

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THE STATE OF DIGITAL MICROFINANCE IN BANGLADESH | 2019

Digitizing transactions is gradually becoming a priority among MFIs

Microfinance institutions have been in Bangladesh for close to four

decades and have impacted the lives of millions of people living in low

income bracket households but digitization was not a priority in the

sector up until the last decade. Transforming needs of its main client base

and technology leapfrogging ability of the general populace is influencing

MFIs to rethink their operations and how digitization could create access

EXECUTIVE SUMMARY

1

In Bangladesh, microfinance has been extensively used as a tool to target

poverty alleviation

The term “microfinance” refers to the full set of financial services that

target poor and low-income households. Microfinance has been an

instrumental tool in disseminating loans and capital for those unable to

apply for formal banking and financial services due to income and credit

barriers. As of 2017, BDT 1,207.54 billion (~USD 14 billion) has been

disbursed to 33 million people as loan through MFIs. Interest rates

offered by MFIs are relatively higher compared to rural agent banking

channels, with effective interest rates charged by MFIs ranging between

20-27% and the latter typically charging interest rates between 9%-16%

on loans.

Microfinance industry snapshot

Particulars

Number of reporting NCG-MFIs

Number of employees

Number of branches

Number of members

Number of loan receiverduring the year

Number of outstanding borrowers

Loan disbursed duringthe year (BDT Billion)

Loan outstanding (BDT billion)

Members net savings (BDT billion)

2015-16

530

230,637

18,609

37,657,462

32,232,244

30,608,042

955.77

611.61

294.11

Change between 2016-17(in %)

-3.77

3.92

2.99

4.14

3.52

6.01

26.34

25.97

18.68

2016-17

510

239,689

19,166

39,216,816

33,367,557

32,446,130

1,207.54

770.47

349.06

2017-18(Projected)

510

249,096

19,740

40,840,741

34,542, 859

34,394,600

1,526

970.59

414.28

Source: Microfinance Statistics Yearly Comparison (2016,2017) (including Grameen Bank) , CDF

1. Millennium development goals: Bangladesh progress report-2015, UNDP

1

1


for them beyond their traditional channels and how it could also positively

impact the lives of millions of borrowers. MFIs’ two main operations, i.e.

loan collection and disbursement are the points where digitization creates

the greatest impact. Transaction digitization in the MFI sector has emerged

mostly in two forms i.e. Mobile Financial Services (MFS) and banking

services. Both of these services are often referred in the industry as ‘mobile

money’. Digital savings is also a main target service of MFIs and is a strong

incentive behind digitizing transactions.

Transaction digitization is a fairly new concept for most MFIs but not an

alien one. MFIs acknowledge the ability of transaction digitization to create

greater efficiency and transparency and also recognize that digitization is

beneficial for their clients as well.

According to recent Financial Inclusion Insights (FII) data (2018), around

47% of Bangladeshi adults are financially included with 17% having a

registered mobile money account, 25% with a full-service bank account and

23% with a full-service Non Bank Financial Institutions (NBFIs), which

includes MFI accounts. These figures show encouraging leaps in financial

inclusion and technology adaptability of the population.

Source: Bangladesh Quicksights Report, Financial Inclusion Insights (FII) , 2018

Financial Inclusion in Bangladesh - 2018*

(Shown: Percentage of Bangladesh adults, N=6,000)

25% 23% 17%

have a full-servicebank account

have a full-serviceNBFI account

financially included47%

have a registeredmobile money account

*Overlap representing those who have multiple kinds of financial accounts is not shown

Low income women living in rural communities are a key beneficiary of

digitization

Among benefits such as increased efficiency and cost savings, empowerment

of women is an instrumental decision making factor for MFIs digitizing

transaction. Around 18% of women in rural areas now have an active digital

stored-value account, which means they have money in a digital format.

2


MFIs that have piloted transaction digitization have experienced a lot of

positive reviews from women clients. According to respondents from

MFIs, transaction digitization has enabled women to:

Women borrowers could track their savings and spending without having

to log them in a notebook. This helped in preplanning savings and basic

expense management.

It was much more secure compared to cash. Previously they had to either

keep cash stashed at home without any security, spend it on excess raw

material for their business and convert the saving to asset format or give

the money to their husband or a senior family member as savings. Having

the cash in a digital format meant they had stronger ownership of their

savings.

The ones who were habituated with MFS services, could send money

more effortlessly. It saved them travel time, time they could now devote

to their businesses.

Given that women have a close knit community in rural areas, the ones

who were using mobile money became advocates of the product and

other women borrowers started requesting digital payment options

instead of cash. Digitizing their money in general created a sense of

empowerment among women clients in the community.

2. Bangladesh Quicksights Report, Financial Inclusion Insights (FII) , 2018

Of the 47% adults who are considered to be financially included i.e. having

an account with an institution that provides a full suite of financial

services, 18% are women with a low income. Of the unregistered mobile

money user base who conduct over the counter (OTC) transactions

without a registered account, 40% are women . This shows women are

adopting digital money fast and there’s an opportunity here for MFIs to

help millions of women utilize the benefits of digital money to better their

lives.

2

3

4

1

2

3

Keep better track

of their finances

Save without having

to worry about

security of cash

Send money for

business purposes

much faster

Create social recognition

for using digital

finance services


Of the total 39.2 million MFI members , roughly 35 million are women and

in the financial year 2016-17, around 33 million borrowers received a

loan, of which roughly 30 million were women (estimated). Given the

positive benefits experienced by women borrowers in pilot programs, this

is an immense opportunity for MFIs to transform the lives of millions of

women business owners in Bangladesh by just digitizing transactions.

Industry experts believe close to 2% of women clients are now unofficially

using mobile money to make repayments and are utilizing Digital

Financial Services (DFS). Even if just a 15% transaction digitization is

achieved this year, the industry could transform the lives of close to 4.5

million women in a matter of months.

3.Bangladesh Microfinance Statistics 2016-17, Credit and Development Forum and KII

6XIncrease inefficiency

Loan disbursement

5XIncrease inefficiency

Loan collection

1.4XIncrease inefficiency

Cash management

Digitizing transactions has resulted in higher efficiency for MFIs

Microfinance institutions that have piloted transaction digitization has

cited four main benefits to the change as digitizing transaction:

1. Increases efficiency:

2. Increases internal control with drastic reduction in malpractices in

pilot branches. BURO reports that after digitizing branches, their reports

of malpractices fell to just 1 or 2 instances per month on an average.

3. Increases accessibility as credit officers were now more free to

pursue business development in unexplored areas. Digitizing transactions

meant that some of credit officers’ duties were now obsolete and now

they could be utilized to target unexplored client segments and areas.

Loan collection - A process that took 2.5 hours on an average now

takes around 30 minutes (5X efficiency increase).

Cash management - 30% time saved in cash management by branch

employees (1.4X efficiency increase).

Loan disbursement - When loan disbursement was not limited, MFIs

could disburse loans in a matter of 2 hours on an average, a task that

would take them a whole working day before digitization (6X efficiency

increase).

Processing documents - Digitization has saved time in data entry, file

management and in BRAC’s pilot program an average BDT 1.5 million

(~USD 179,000) was saved in a year just on paper and printing.

3

Just a 15%

transaction

digitization would

positively impact

women borrowers

4.5million

4


4. Meets consumer demand as clients themselves were now requesting

options to pay digitally. On an average they’d save at least USD 3 monthly

on travel cost just by opting to pay digitally.

5. Can potentially reduce interest rates as MFIs can take advantage of

greater reduction in administrative costs due to digital deposit collection

and savings mobilization. Improved internal control and process

efficiencies can further reduce internal costs, which may contribute in

lower cost of borrowing.

Major challenges in the transformation are addressable by focusing on

operations

Digitizing transaction is not without its challenges either, the

transformation process generally has four main levels of challenges:

Operational challenges in the form of increased cost due to additional

charges of digital transaction and lack of IT infrastructure capable of

bridging the gap between DFS providers’ platforms and MFIs’ systems.

Increasing the volume of business is the best solution to recuperating

some of the costs and building custom platforms for MFIs is the logical

action for most DFS providers or MFIs who are willing to fill the vacuum.

Management challenges in the form of obsolescence of some of credit

officers task is a challenge expressed by all MFIs but they believe this can

be solved through transforming the general activities of credit officers

and redesigning center meetings.

Client level challenges due to lower accountability of clients to pay after

digitization is a fear expressed by MFIs. However, there have not been any

recorded cases of clients not paying or paying late due to digitization. Low

tech literacy of client is also a practical challenge to digitizing transaction.

Lastly, regulatory challenges in the form of cash-out ceiling of BDT

10,000 (~USD 119) per day for DFS account is a major roadblock to using

digital transaction for disbursement. On an average a MFI loan size could

be from BDT 50,000 (~USD 595) to BDT 100,000 (~USD 1,190) and a

client would have to visit the agent or ATM for ten days if they wanted to

withdraw BDT 100,000. This is not an efficient system and a hindrance to

scaling up wage disbursement. Certain regulatory revisions are needed to

allow the industry to operate efficiently and target greater financial

A BDT

(approximately

USD 119) cap on

cash-out limit per day

is a challenge to

implementing

digital loan

disbursement

10,000

5


inclusion. Developing the ecosystem of merchants that use DFS would

also mean borrowers would be able to use the loan digitally and require

less cash-out. Due to the cap on cash-out, MFIs are not being able to

utilize digital loan disbursement and fully reap the benefits of digitization.

Having to disburse loan through cash means added cost components

hinder the cost efficiency advantage of digitization. If cash-out limits are

removed, there’s a chance MFIs could keep the money within the DFS

ecosystem by both disbursing and collecting loans digitally. This would

possibly help them reduce the overall cost of borrowing.

This white paper focuses further on opportunities of digitizing

transactions, what are the benefits of digitization that can be gained

through the process and what are the challenges that need to be

addressed in order to successfully digitize transactions.

6


RECOMMENDATIONS FOR THE INDUSTRY

Although transaction digitization in MFIs is only at its infancy, there’s

tremendous opportunity of positively impacting the lives of millions of

borrowers, especially women, by utilizing the learnings from pilot

programs. In order to successfully digitize transactions, MFIs need to:

1. Design operations in a way that captures the efficiencies of

digitization by:

Implementing change management process and transforming the ways

credit officers operate. Changing roles would create greater opportunities

for business development.

Introducing payment aggregators and capable IT service providers who

can bridge the technological gap between MFIs and DFS providers.

2. Improve the value delivered to clients by:

Reinventing the way center meetings are conducted. Although center

meetings have been instrumental in the past for loan collection and

creating accountability among borrowers, there’s opportunity of

transforming the traditional center meetings to knowledge dissemination

hubs.

Conducting customer journey mapping to find out how best MFIs can

serve their clients by addressing their main pain points of using DFS.

3. Strengthen the digital ecosystem and address key regulatory

bottlenecks by:

Working extensively with DFS providers to create proof of concept and

best practices for digitizing clients. Developing the ecosystem will mean

borrowers will have more avenues to utilize their loans digitally and will

have less cash-out requirements.

Advocating regulatory bodies to create policies that are more supportive

of growth. Gradually increasing the cash-out limit will be useful for

implementing digital loan disbursement.

7


THEMICROFINANCEINDUSTRYAT A GLANCE

Modern microfinance in Bangladesh has expanded its scope from

home-based activities and self-employment to savings and insurance,

microenterprises, and productive employment and has helped in

diversifying borrowers’ economic activities. Although historically

agriculture has remained the highest loan recipient sector, trade and

business sector based borrowings are gradually increasing, indicating an

increasing diversification of economic activities.

The sector employs around 231,000 people as of December 2017 and is

regulated by the Microcredit Regulatory Authority (MRA), which was

incorporated under the “Microcredit Regulatory Authority Act 2006” for

regulating the establishment and operation of NGO-MFIs in Bangladesh.

Grameen Bank is out of the jurisdiction of MRA as it was operated under a

distinct legislation- Grameen Bank Ordinance, 1983. In 2013, Bangladesh

parliament passed the 'Grameen Bank Act‘, which replaced the previous

ordinance, authorizing the government to make rules for operating the

bank on day to day basis.

Loan disbursement has been increasing over the last decade

Microfinance Institutions (MFIs) have captured a rapidly growing segment of

the Rural Financial Market (RFM) in Bangladesh. Microcredit programs (MCP)

in Bangladesh are implemented by various formal financial institutions such

as nationalized commercial banks and specialized banks, specialized

government organizations and Non-Government Organization (NGOs).

Although more than a thousand institutions are running microcredit

programs, only 10 large microcredit institutions and Grameen Bank represent

87% of total saving and 81% of the total outstanding loan of the sector.

Source: Microfinance Statistics 2016-17, Credit and Development Forum (CDF)

Sector-wise disbursement of loans by MFIs in 2016-17

Agriculture OthersTrade andbusiness

Small andcottage industries

Socialsector

Transport andcommunication

49% 34% 8% 4% 3% 2%

9

4. Bangladesh Microfinance Statistics 2016-17, Credit and Development Forum

4


Top ten microfinance institution snapshot

Grameen Bank (GB)

BRAC

ASA

BURO Bangladesh

TMSS

SSS (Society for Social Services)

Jagorani Charka Foundation

Uddipan

PMUK (Padakhep ManobikUnnayan Kendra)

Organizations

Based on the amount of outstanding loan in 2016-17, ten NGO-MFIs

including the Grameen Bank have been marked as the top ten MFIs

operating in Bangladesh.

Most of the major MFIs are self-sustaining, and most get their lending

funds from a combination of their own profits, deposits, and loans from

bank. Organizations like Palli Karma-Sahayak Foundation (PKSF) and

Private Commercial Banks (PCBs), Specialized Banks (SBs), State-Owned

Commercial Banks (SCBs), Jubo Unnayan Adhidaptar, Pally Daridra

Bimochan Foundation (PDBF) have funded 619 MFIs during 2016-17 in

the form of loans. A total amount of BDT 95,532 million (~USD 1.1 billion)

was disbursed to the MFIs.

The increasing loan disbursement trend shows demand for loans will keep

on growing with increasing economic development and activity. If current

CAGR of 23% holds, the projected loan disbursed in 2018 would be

around BDT 1490 billion (~USD 17.7 billion) and around BDT 1830 billion

(~USD 21.8 billion) in 2019 and would continue to grow at this rate.

The remaining MFIs together

Total

SAJIDA Foundation

Source: Bangladesh Microfinance Statistics 2016-17, Credit and Development Forum

2,475

Percentageof loan disbursementcontribution by MFI

17%

22%

22%

5%

3%

2%

1%

1%

1%

1%

24%

100%

Members receivedloans durings 2016 - 2017

8,308,379

5,220,302

7,538,641

1,028,821

876,849

576,609

397,644

337,291

327,288

153,840

8,601,893

33,367,557

Loan disburseddurings

2016 - 2017(in BDT million)

Loan disburseddurings

2016 - 2017(in USD million)

207,890

266,629

269,586

54,393

33,057

27,625

15,402

13,589

14,440

12,415

292,511

1,207,538

3,174

3,209

648

394

329

183

162

172

148

3,482

14,375

5. Bangladesh Microfinance Statistics 2016-17, Credit and Development Forum

5

10


Source: Bangladesh Microfinance Statistics 2016-17, Credit and Development Forum; 2018, 2019 and 2020 figures are projected

Annual loan disbursement Vs. Loan recollection (BDT billion)

2016

956 924

2017

1,2081,172

651 647

2014

828797

2015 2020

2,253 2,108

1,425 1,487

2018

1,830 1,733

2019(projected) (projected) (projected)

Annual loan disbursement Annual loan recollection

Competition for MFIs are on the rise

Microfinance providers charge interest rates that are significantly higher

than commercial banks for covering greater operating costs, and the

higher costs of lending. MFIs operating costs are higher than other

financial institutions because they work with poor, rural communities that

borrow small amounts. Small loans take longer to process. In the absence

of a credit bureau, employment history or the collection of collateral,

MFIs provide a high-touch service that sends thousands of Field Officers

(FOs) to the doorsteps of their clients to make sure they are able to cope

with the requested amount of credit. MRA has set the current interest

rate cap for MFIs at 27%. There is also rising competition from agent

banking channels as they penetrate deeper into rural areas and offer loan

interest rates similar to those of retail banks that range between 11-16%,

and even as low as 9%-9.5% for agricultural loans as mandated by

Bangladesh Bank (although there is an additional processing fee)6. The

proportion of agricultural loan disbursement through commercial banks’

own channels is expected to increase due to government policy, and this

can potentially eat into the capital available for MFIs7.

Commercial banks are pushing for greater agent banking presence in rural and peri-urban areas

Agent banking, one of the renowned mechanisms for providing banking

services to the unbanked got introduced in Bangladesh in late 2013. Since

its launch, the service has gained significant traction among the

underserved population within a short span of time. By the end of

September 2018, the number of accounts for agent banking reached 2

million. At present, 18 banks are licensed to provide agent banking

services in Bangladesh, through 3,902 agents in 5,791 outlets. Almost

11

6. The Daily Star, 2018. Loans for farmers to be cheaper.

7. The Daily Star, 2018. New policy to sheild farmers.


Source: Bangladesh Bank and LightCastle projections

91% of the agents and 92% of the outlets8 are situated in rural areas, which

explains the rapid spreading of agent banking in the rural areas of the

country. Bangladesh Bank mandate says that the ratio of the number of

sub-agents/outlets of a bank will be 2:1 for rural and urban area. That

means a bank must have at least 2 rural agent banking outlets to have 1

urban agent banking outlet. Hence, banks are highly aggressive in their

expansion plans in rural areas as it would enable them to open rural

branches, which are the most profitable.

Operation modalities of MFIs are being gradually digitized

When MFIs started their operations, digitization was not a priority due to

lack of digital infrastructure, lack of consumer adoption and higher costs.

This scenario has changed drastically over the last decade with mobile

internet proliferation and advent of DFS based services. Initially, there were

only a selected few like BRAC willing to test transaction digitization in their

operations and piloted a few of their branches. Clients are increasingly

becoming attuned to digital services and prefer transactions done through

DFS providers.

The MFS industry has been instrumental in driving greater digitization

There are currently 18 banks that have the license to provide mobile

financial services nationally with about 887 thousand agents all over the

country. As of December 2018, they are catering to the need of about 67.52

million registered clients, among which 37.31 million are active accounts.

Everyday transactions of about BDT 10.36 billion (~USD 123 million) are

taking place within these banks, agents and clients, making Bangladesh one

of the top countries in terms of MFS usage. An average transaction of BDT

316 billion (~USD 3.8 billion) is being conducted each month, growing at

an average CAGR of 2%9.

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8. Guidelines on Agent Banking, Bangladesh Bank, 20189. Mobile Financial Services (MFS) comparative summary statement, Bangladesh Bank, Accessed on: 02.03.2019

MFS growth trend 2018-2022 (projected)

321.1 340.8 361.8 384.0 407.6

67.52 78.26 90.71 105.14 121.87

2018 2019(projected)

2020(projected)

2021(projected)

2022(projected)

Registered clients (millions) Total transaction (BDT billion)


Source: “The Mobile Moment of Banking” December 2017, IDLC

Source- Bangladesh Bank, December 2018

Even though, there are a handful of MFS providers in the market now,

bKash and Rocket are the two leading mobile money providers in

Bangladesh. The MFS arena is mostly dominated by bKash (BRAC Bank

Ltd.), which is the pioneer of MFS in Bangladesh. bKash owns more than

two-third of the entire market share in Bangladesh. Followed by bKash,

Rocket (Dutch Bangla Bank Ltd) has captured a fair share of the market in

a very short time. The most common product offerings of MFS includes

account opening, cash-in, cash-out, money transfer, bill payment, salary

disbursement and foreign remittance. The fee structures of the most

commonly used services according to providers are as follow:

13

10

Digital financial services

Account opening

Cash-in at agent

Cash-in at bank branch

Cash-out from agent

Cash-out from ATM

Cash-out from bank branch

Rocket

Free

0.9% or BDT 5 (~USD 0.06)

BDT 10 (~USD 0.12)

0.9% or BDT 5 (~USD 0.06)

Free

BDT 10 (~USD 0.12)

bKash

Free

Free

N/A

1.85%

2% [minimum withdrawalamount is BDT 2000 (~USD 23.8)]

N/A

10. “The Mobile Moment of Banking” December 2017, IDLC, Accessed on: 02.03.2019

18 Banks with MFS

886,473 Agents

67.52 millionRegistered clients

BDT 10.36 billion(~USD 123 million)

avg. dailytransaction

37.31 millionActive accounts

MFS vs banking comparative analysis


CURRENTTRANSACTIONDIGITIZATIONLEVELS OF MFIsIN BANGLADESH

Top MFIs are piloting transaction digitization with varied approaches

MFIs now see the changing client landscape, how transaction digitization

would create greater accessibility for them and how increased efficiency is

increasingly becoming crucial to maintaining a high operation heavy

business in a competitive environment. The need for digitization has

become prevalent from both the supply and demand side as well. Although

some MFIs like SHAKTI and BRAC initially piloted loan disbursement

through DFS, they had to scale down disbursement as a regulatory

mandate was published by the Bangladesh Bank, restricting the daily and

monthly amount that can be withdrawn through a DFS account.

BRAC Bangladesh, being one of the market leaders and coming second to

Grameen Bank, has a market share of around 22.08% based on loan

disbursed. According to the Credit and Development forum11 in 2017, it

disbursed the highest amount of loan to micro-enterprises. It has seen a

rising trend in terms of both number of clients and number of branches. In

2017, BRAC disbursed loans of about BDT 267 billion (~ USD 3.17 billion)

to over 6 million customers all over the country. BRAC currently has more

than 2,144 branches situated at different parts of the country. Both BURO

Bangladesh and SAJIDA Foundation have achieved positive trend in terms

of number of members, branches, loan disbursement and market share

compared to the previous year. The current number of branches of BURO

Bangladesh is over 712, which is serving about 1.5 million customers all

over the country and have disbursed loans worth over BDT 54 billion

(~USD 648 million) in the past year, holding a market share of 4.5%. Sajida

Foundation serves more than 2.4 million customers with about 188

branches all over the country. It disbursed more than BDT 12 billion (~USD

148 million) as loans last year holding a market share of around 1.03%.

15

11. CDF, 2017, Accessed on: 02.03.2019

MFINumber ofmembers(2016-17)

Market share as %of total number

of members

Number ofbranches(2016-17)

Market share as %of total number

of branches

Loan disbursedapprox. BDT

in million(2016-17)

Market share as %of total loan

disbursed(2016-17)

BRAC Bangladesh 6,120,107 15.61% 2,144 11.19%266,629

(~USD3179 million )

22.08%

BURO Bangladesh 1,449,085 3.7% 712 3.71%54,394(~USD

648 million)4.5%

SAJIDA Foundation 2,45,539 0.63% 188 0.98%54,394(~USD

648 million)1.03%

Top microfinance institution comparative analysis


BRAC Microfinance’s transformation journey

Among those that have piloted DFS, everyone had a different experience

with the process, showing that there’s an opportunity of streamlining the

process by introducing best practices taken from the pilot institutions.

The digitization of BRAC’s financial products is driven by a strategic

framework, which emphasizes four guiding pillars at the user level, namely

trust, ease of convenience, ease of understanding and adapting to a digital

ecosystem for the clients. For BRAC, efficiency and transparency are the

key driving factors for the digital transformation at the corporate level.

3 years after its first pilot, BRAC now uses a digital system, based on

tablets and MFS, for DPS installment collection from their clients. BRAC

has partnered with bKash – the largest MFS provider in Bangladesh and a

subsidiary of BRAC Bank, for collecting deposits from their members.

BRAC is presently offering hands-on teaching to community members on

DFS usage and has local Customer Service Assistants (CSAs) to assist in

account opening and other issues12. Currently around 200,000 clients use

the service for monthly savings deposit, and over 12,000 Credit Officers

are using tablet devices for loan recovery management. In addition, BRAC

has established seven microfinance branch offices in southeast

Bangladesh where loan collection and savings deposit mobilization are

almost entirely digitized. The motive behind this was to reach the

financially excluded community residing in the remote islands, riverine

islands, and wetlands, which are more inaccessible.

Details

16

Average digitizedloan size:

BDT 30,000

(~USD 360)

Number ofbranches digitized:

32 branches

Number of digitalsavings clients:

200,000

Total digital-enabledDPS accounts

745,200

No. of activedigital wallets

842,914

Women with digital-enabled DPS accounts

727,688

No. of Credit Officersusing digital devices

12,000+

Total digital savingsBDT 3.47 billion

(~USD 41.4 million)

12. BRAC, 2019. Bridging the gap in financial inclusion


17

1. Gives cash2. FO/CO records payment on tablet

Client

Microfinanceinstitution

MFS provider

Village meeting Tablets

3. Relays payment

4. Records payment

Savings: Members can send installments directly to the bKash wallet

number provided to them by BRAC.

Loans: Credit officer goes to village meetings, takes cash from individual

borrowers in the group, enters amounts into tablet in bKash interface

and payment is recorded. Once the cash repayment has been made, the

client immediately receives an SMS confirming the transaction and this

has replaced the need to maintain manual transaction booklets.

Modality

Currently, as an alternative lending model, BRAC has partnered up with a

start-up, ShopUp, that works with f-commerce women entrepreneurs.

ShopUp sanctions loans automatically using their own algorithm and the

loan is then disbursed to the bKash wallets of the borrowers. The

borrowers make the repayments through the start-up from their profits.

SAJIDA Bangladesh’s experience with digitization

Average digitizedloan size:

BDT 24,000 (~USD 300)

Number ofbranches digitized:

5 branches

Number ofclients served digitally:

10,000 clients

Average digitalmonthly transaction:

BDT 5 crore

(~USD 600,000)


Client goes to Rocket agent, gives them their unique client number and

then pays the agent. The agent processes the payment through their app

based on the unique client number provided for each client.

Modality

ClientRocket Agent

2. Gives cash and

unique client

number

3. Processes

payment with app

4. Records payment

1. Provides unique client number

Microfinanceinstitution

DFS provider

18

SAJIDA has started digitizing their collection and payments with Rocket

(DBBL). By the end of December 2017, SAJIDA Foundation had five

cashless branches operational under a pilot project titled ‘OPTIX’, which

served more than 8,000 clients, cumulatively transacting around USD

600,000 each month. The project demonstrated that borrowers were

much more adaptive to the system than earlier expected. Female

borrowers especially preferred to pay through Rocket agents instead of

through FOs in group meetings. The ease of payment was much higher

for them , as the system negated their need for travel. SAJIDA worked

with BFA to build a custom 'bridge' between the DFS provider's API and

their own API to make the system more integrated13. Additionally,

SAJIDA had piloted loan disbursement in 15 branches but had to

discontinue due to the cash-out cap. However, they're using bank checks

to disburse loans now in the spirit of remaining cashless.

Details

13. Pioneering Cashless Microfinance in Bangladesh, SAJIDA, 2018


BURO provides a unique identifier number to clients, which clients will

use to make payment to BURO through bKash. Clients use their own MFS

account or pays through an agent's account to BURO's company MFS

account and records their transaction.

Modality

1. Provides unique client number

Client

Agents withMFS accounts

2. Gives cash and

unique client

number

2. Gives cash and

unique client

number

3. Records payment

3. Relays paymentMicrofinance

institution

MFS provider

19

For BURO Bangladesh, digitizing transactions has been pivotal in

reducing malpractices by ensuring greater transparency and

accountability. BURO has partnered with bKash to open its company

account and train their borrowers to send money using a specific code.

The code helps BURO track installment payments much more

efficiently. BURO had initially piloted with another MFS provider but

had failed to scale up their operations due to lack of resources. It started

a new partnership with bKash in November 2018 to digitize payments

of 1.7 million households under BURO. Due to this MoU, instead of

having to pay 1.85% for each transaction (sending money or cash-out),

the client will be paying 1% from now on. bKash is also building a custom

software interface, through which BURO will be able to maintain and

track their client transactions. Tentatively 15 branches are being

planned for the pilot phase starting in March 2019, with plans to

convert all of their branches in time.

Details

BURO Bangladesh ready to digitize transactions


REASONS WHY MFIsARE DIGITIZING -BENEFITS ANDOPPORTUNITIES

Although there are systematic challenges to digitizing an industry that

has been traditionally high touch and highly field operation driven, the

need for transaction digitization is clear among most MFIs as the benefits

mitigate some of the more pressing challenges the industry faces. Among

the major benefits of transaction digitization, increased internal control,

increased time savings, increased accessibility to markets and increased

efficiency in general, are the top line reasons expressed by most major

MFIs on why they are willing to digitize.

1. Increased efficiency

Most MFIs that have piloted a DFS based system have experienced time

savings in their operations. From time savings in loan collection, cash

management to processing documents, digitization has helped translate

some of these time savings into cost savings as well. Admittedly,

transaction digitization has also added an additional digital transaction

cost component to the already high cost of operations. However, MFIs

believe increased volume of business would help plough back the loss in

revenue due to the additional cost.

Time spent

in loan

collection

Before digitization, 2 to

2.5 hours (including

travel) would be needed

to be devoted by each

credit officer to do

manual data entry and

collect loans each day.

This collection time has reduced to

on an average of 30 minutes,

resulting in a 5x increase in

efficiency. Mobile money payments

are instantaneous and in case of

BRAC's tablet based system, the

time is spent mostly to do data entry

by credit officers.

Branch

management

21

Situation Before transactiondigitization After transaction digitization Major

beneficiaries


Credit officers, branch

managers and accoun-

tants are all involved in

cash management,

according to SAJIDA's

study of their prospective

mobile money implemen-

tation branches. 31% of

credit officer’s time, 11%

of branch manager’s time

and 46% of accountant’s

time are occupied by cash

management.

After implementation of mobile

money, SAJIDA reduced their

number of credit officers in some

branches and increased portfolio of

existing credit officers, effectively

utilizing their capacity. BRAC

experienced a 30% time saved in

pilot branches, resulting in a 1.4x

increase in efficiency, due to transac-

tion digitization and usage of mobile

money (according to internal study).

Time spent

in cash

management

Branch

management


beneficiaries

Monthly meetings

would typically take a

day's work (10 to 12

hours) for loan

disbursement and due

diligence.

Before the regulation blocking

withdrawal of more than BDT

10,000 (~USD 119) by end-client, for

those that had implemented mobile

money based disbursement, the time

had reduced to 2 hours on an

average, resulting in a 6x increase in

efficiency. Although mobile money

payment was instantaneous, due

diligence and processing still took

some time.

Time spent in

loan

disbursement

Branch

management

Major cost components

of branch operations

were salary, stationaries,

and logistics among

others.

Due to implementation of mobile

money, an additional cost

component was added. For SAJIDA

this was a 1% charge on any financial

transaction conducted through

mobile money. SAJIDA believes a 6%

reduction in overall cost achieved

through a combination of increased

revenue and other reduction of cost

components would offset the

additional 1% cost.

Cost of

branch

operations

Organization,

branch

management

22


beneficiaries


2. Internal control

MFIs have expressed that increased digitization, in general, has created a

greater locus of internal control for them. As micro-finance is a high touch

business, the operations are respectively highly widespread with around

19,000 branches and 239,000 employees nationwide. In a centralized

system with limited digital support, it is difficult to have a clear overview

of the business and plan growth accordingly. A web-based loan

management system (LMS) gives MFIs real-time snapshot of the business

and automation of loan collection through DFS saves time and reduces

malpractices.


beneficiaries

Processing

documents

Processing of documents

(for digitization and for

account creation) was

initially lengthy and

taxing for branch

employees

Currently 40% of MFI branches have

a computer at the minimum and

45.9% have an internet connection.

These numbers are slowly increasing

as not all MFI operations are

computerized yet and require

significant investment. However,

BRAC has reported that after

digitizing their pilot branches, on an

average BDT 1.5 million (~USD

179,000) was saved on just paper

and printing.

Branch

management


beneficiaries

Number of

malpractic-

es

reported

A few COs/FOs did not

report cash collection

properly, siphoned

installments and also

created delays in process-

ing to utilize cash

collected for personal

use.

BURO reports that after digitizing

their processes, instances of

malpractices reduced to just 1 or 2

instances per month in pilot

branches.

Organization,

branch

management

23


beneficiaries


beneficiaries


3. Increased accessibility

Digitization of loan collection meant field officers were now free to

pursue more business development and increase their portfolio. The field

officer would now be able to devote their time on spreading their network

of customers and target areas that were inaccessible before. This would

give MFIs more access to areas to increase their business.

14. Microfinance statistics 2016-17, Credit and Development Forum (CDF)

4. Consumer demand

BURO reports that clients initially came to the field officers and started

asking for MFS payment options as it’d save them travel time and cost. It

was also more conspicuous for women borrowers who were not

comfortable attending center meetings on a regular basis or disclosing

their business dealings to their family. Other MFIs experienced similar

requests from clients to transform their payment systems to something

less time consuming.

24

Situation Before transactiondigitization After transaction digitization

Number of

members

per credit

employee

Number of members

handled per credit

employee on an average

was 25414 in 2016-17.

Although some of the duties of

credit employees are gone due to

implementation of mobile money,

MFIs expect the number of members

handled per credit employee to

increase beyond 254 as now credit

employees will be utilized more for

business development.

Branch

Organization


beneficiaries


5. Possibility of improved interest rates

The interest rates of MFIs have shown an upward trend since its inception

in Bangladesh. As the government was concerned about low income

borrowers having to pay a hefty sum of interest, an interest cap of 27%15

per annum was announced by MRA in 2010. The average effective annual

interest rate charged among established MFIs now range between 24% to

a maximum of 27%. Thus the cost of borrowing for MFI borrowers is

significantly high compared to other industries. A large portion of the

interest rate is composed of high administrative expenses and other cost

vertices for MFIs such as contingency reserves, provision for bad debt, tax

expenses, the credit rating of client and capitalization rate contribute to

the high cost to lend. A comprehensive costing of microfinance lending

has not been done yet, to the best of our knowledge. However, global

experience to date indicates that digitization has the potential to

decrease costs and in turn decrease high interest rates.

Digital microfinance can lead to operational efficiencies since MFI staff no

longer have to spend time filling out paper forms16 before entering data

into systems, while introducing automated processes and using digital

currency for transactions reduces staff fraud, errors and the risks

associated with handling cash and repayments. In fact, the MFI, FINCA

Tanzania, after introducing mobile banking channel had managed to

decrease their per transaction costs by 60% and 30% compared to

brick-and-mortar and agent banking channels17.

25


beneficiaries

Cost of

travel of

client

Clients typically need to

spend BDT 100 to 120

(~USD 2) on an average

for travelling on e-bike,

CNG autorickshaw or

rickshaw from home to

branch/collection center

within a 15-20 km radius

per trip.

This cost has been eliminated for

those that have been sending money

through mobile money. So on an

average a client with bi-weekly

payments saves around BDT 250

(~USD 3) per month just by paying

through mobile money. There's also

inherent time savings that clients can

devote to their businesses, which

results in incremental cost savings as

well.

Client


beneficiaries


From a client perspective, microfinance through DFS providers can

deliver a better customer experience and provide quick responses while

offering similar services to those at branches, improving customer

retention and loyalty18. Similarly, customers are likely to save more since

digital tools become easier to use and access for customers, making the

formal saving process more convenient and increasing the likelihood that

customers will save. An example of this is Diamond Bank of Nigeria, which

saw 74% of account holders transact monthly and 30% transact weekly

with loan officers visiting them using Digital Finance Applications (DFA),

which is an improvement over their traditional processes19.

All of the above are likely to contribute to both lower interest rates and

lower interest rate spreads for digital MFS providers compared to

traditional brick-and-mortar and agent-banking models of MFS.

MFS credit has still not been introduced in Bangladesh. So, the question of

whether or not it will be a matter of convenience for both borrowers and

lenders still remains. For example, in Kenya, after MFS providers

introduced credit systems, MFIs such as Choice Microfinance, Century,

Daraja and Maisha faced negative repercussions20. They went on a

loss-making streak due to the higher convenience factor of MFS credit,

which eventually drove up non-performing loans on one hand and

diminishing savings on the other. If MFS providers of Bangladesh decide

to launch themselves in the microcredit market, there is a risk of similar

outcome.

On the other hand, if MFIs could provide credit through MFS providers

then the likelihood of MFS providers to encroach in the microcredit

market on their own would be diminished. This way the administrative

hassles for both borrowers and lenders would decrease and the synergy

among MFIs and MFS is likely to strengthen. That being said, this would

require the provision for digitizing the entire due diligence procedure,

which is also an extra investment element for both MFIs and MFS – an

investment which may be justified considering the probable positive

outcomes.

26

15. Helix Institute, November 2015, “Digital Financial Services: Opportunities for MFIs”, Nov. 2015

16. Alliance for Financial Inclusion, Digital Transformation of Microfinance and Digitization of Microfinance Services to Deepen Financial Inclusion in Africa, 2018

17. Alliance for Financial Inclusion, 2018

18. Women’s World Banking study, 2014

19. Standard Digital, Mobile lenders drive microfinance entities to early grave, Jan 2019

20. Circular by the Microcredit Regulatory Authority (Bangladesh), 2010


CHALLENGESASSOCIATED WITHTHE PROCESS

There are inherent challenges to the process faced by most of the MFIs

that have piloted transaction digitization. The major challenge is

transforming the basic traditional process of loan disbursement and

collection in a manner that does not cause resistance from management

or from the clients. Broadly, the transformation has challenges on four

major levels for loan collection: operation, management, client and the

regulatory policies.

Operational challenges

Cost of transaction is crippling for MFIs and borrowers

When borrowers receive their loan through MFS they have to pay the

standard cash out charge set by the provider. bKash, the leading MFS

providers in Bangladesh, charges 1.85% of the total cash out amount. As

majority of the MFI borrowers belong to the lower income group, this

withdrawal charge is significant for most. However, BURO expressed that

a lot of their clients are already bearing this cost and are willing to pay via

MFS if it saves them time. BURO’s new contract with bKash effectively

brings down the 1.85% cost down to 1%.

Lack of proper IT infrastructure

Increased cost of transaction

Obsolescence of some of FOs duties

Fall in utility of center meetings

Lower accountability to pay

Low tech literacy

Low cash-out limit

Operational Challenges

Management Challenges

Client Challenges

RegulatoryChallenges

28


Additionally, MFIs that have been using mobile money platforms for loan

disbursement and recollection, have a charge associated with their

transactions. SAJIDA has to pay 1% charge to Rocket for any transactions

made on their platform. This charge, although seemingly small, is a huge

challenge as margins are already razor thin with high operational

expenses and interest cap. An additional interest charge of 1% on both

loan and interest, roughly adds 10% in expenses to the overall portfolio

according to SAJIDA. However, the cost associated with cash handling

operations has gone down. SAJIDA believes an increase in the volume of

business will offset the increased cost

Lack of proper IT infrastructure is challenging for bridging MFIs and DFS

providers and disbursing loans digitally

Lack of a capable digital financial aggregator is a challenge faced by all

first adopters of the system. Due to the lack of an aggregator, MFIs have

to invest in an intermittent system that acts as a bridge between the DFS

provider’s API and the MFI’s system. This requires significant investment

from MFIs and it is challenging to build systems that are tailored to each

MFIs.

In addition, such a universal aggregator can also enable MFIs to disburse

loans digitally, which could keep the money within the DFS ecosystem and

reduce the costs associated with cashing out.

29

Management challenges

Decision-makers need evidence of local cost savings

The large up-front costs for digitization may be prohibitive for some MFIs,

and managers need evidence of substantial cost savings and affirmative

return on investment in order to take the decision to digitize. However, to

our knowledge, a comparative costing of traditional microfinance lending

versus digital MFI lending has not been carried out in Bangladesh to date.

On the other hand, global experience to date indicates that there are

significant cost efficiencies to be had from digitizing. Indeed, BRAC

microfinance has named cost savings as one of their key impetuses for

digitization and one of the first-movers, if they can generate a positive

return on investment in terms of cost efficiencies, this can pave the way

for other MFIs in Bangladesh.


Regulatory challenges

Low cash-out limit remains the major bottleneck to implementing digital loan

disbursement

Due to a recent revision of regulatory policy, the cash out limit has been

capped at BDT 10,000 (~USD 119) per day to implement AML/CFT

policies. As an average loan size for most major MFIs ranges from BDT

50,000 (~USD 595) to BDT 100,000 (~USD 1190), it is impossible to

withdraw this amount at a feasible time and cost. SAJIDA has somewhat

tackled this issue by providing bank checks to their borrowers for

disbursement. However, other MFIs like BURO and Shakti have faced the

challenge and have focused more on collection than disbursement at the

moment. The fact that DFS providers are unable to disburse digitally is

driving up their costs of digitizing. If MFIs could also disburse loans

digitally, they could keep their money within the DFS ecosystem and

potentially reduce costs.

30

Client challenges

Branch employees have expressed that borrowers’ accountability to repay the

loan has decreased

FOs argue that center meetings are at the heart of its operations and the

lack of it reduces the accountability of borrowers to make payments.

According to FOs, they now do not have direct control over the members,

which often results in delayed loan repayment by the borrowers.

Although instances of borrowers defaulting have not been recorded as of

yet, MFI managements agree that they do need an alternative medium of

engaging their borrowers and reduce default risk.

Field officers’ duties are in need of revision

Due to the implementation of transaction digitization, field officers

experience a lot of idle time as loan collection time has reduced. SAJIDA

in their pilot program let go of one employee in one of their pilot branch

due to idle resources. In other branches however, they increased the

portfolio of each field officer to offset the idle time and create a higher

volume of business. As digitization inevitably reduced the extensive need

of field officers, it becomes a challenge to find ways to best utilize idle

resources.


Mobile wallet is still hard to open and maintain

Opening a mobile wallet requires extensive KYC documents and

involvement of both agent and borrowers. Most borrowers do not have

proper documentations and are not willing to invest the time to make

them as there is no greater need. However, according to FII 2018 report,

the number of people with necessary ID for DFS is now around 86%,

meaning readiness of consumers has increased very fast. KYC process

requires a lot of physical documentation processing due to regulatory

requirements, which can be equally challenging for service providers.

With the introduction of digitization, service providers can now process

documents and relay information to regulatory bodies faster.

31


RECOMMENDATIONSFOR THE INDUSTRY

The industry challenges to digitizing transactions are common across

most MFIs and can be addressed if a few key bottlenecks with the process

can be addressed. Restructuring operations to best reap the benefits of

digitization is the first necessary step that needs to be taken by MFIs to

ensure a smooth adaption of the system. This needs to be followed by the

committment that the value created by digitization is actually benefitting

the client base. Lastly, improving the overall digital ecosystem and

reducing regulatory bottlenecks will be key to ensuring sustainability.

Design operations to capture all the efficiencies of digitization:

Implementing change management process by MFIs is key to ensuring

long-term sustainability of digitization

Field level officers and management are entrenched in their traditional

process of loan disbursement and collection and are often resistant to

change. FOs might be reduced in different branches due to the reduced

need of borrower maintenance, but digitization means each FO is now

capable of handling a larger portfolio. Job responsibilities would need to

be redefined to accommodate the FOs and transform their current role to

a more volume target driven model.

SAJIDA tackled this challenge by redirecting the focus of their FOs on

higher client acquisition targets, as now there was more downtime for the

FOs. Their focus have to be directed more towards client acquisition and

collection from defaulters, as opposed to the traditional loan collection

and disbursement methods. This would entail retraining of FOs and

acclimatizing them to the digitization process.

Loan Disbursement through DFS

The fact that MFIs are only collecting repayments and not disbursing

loans digitally drives up their costs significantly – both in terms of

operational costs of maintaining local branches as well as in terms of

transaction costs and cash-out costs associated with the payment

receipts through DFS. However, in order for digital disbursements to

receive wider acceptance, the cash-out restrictions imposed by the

central bank will need to be revoked and the burden of cash-out fees on

the beneficiaries should be diminished by developing a wider merchant

ecosystem. Although digitization has the potential to reduce high interest

rates, the full benefits of digitization are not being realised by MFIs (who

have digitized) due to restrictions on cash-out limits. This restriction

drives up costs significantly and MFIs are not being able to deliver the full

value of digitization to their clients.

33


Improve value delivered to clients through digitization:

Center Meetings need to be reinvented by MFIs

Center meetings are at the heart of client management for most MFIs.

Although digitization negates the need for periodic center meeting, it

does not substitute the need of keeping borrowers engaged. Without

center meetings, borrowers are isolated and are less accountable to pay

their dues. Center meetings need to be transformed to serve a different

purpose than cash collection and disbursement.

MFIs can utilize center meetings now to disseminate financial literacy,

instill technology adoption among its borrowers by hosting technology

usage training and seminars. MFIs can repurpose their FOs to act as

proponents of financial services in a greater capacity. The fact remains

that center meetings are an essential tool and cannot be abandoned, but

can be transformed to serve a different purpose.

Customer journey mapping after digitization is instrumental to improving

processes

Customers are the most key component of the digitization process. If

clients are not receptive of the system change, the transition will fail to

take effect. SAJIDA started with MFS but had to shift to a banking service

provider as the user experience of its clients were not satisfactory. From a

complicated USSD based interface to a stringent KYC requirements for

opening an account, users faced several roadblocks in adoption.

34

Introduction of payment aggregators and capable IT service providers is a

necessity

Payment aggregators in similar markets have been crucial in alleviating

the issues of one-to-many system transactions. Currently, there are only a

few IT companies such as DataSoft and SouthTech, having capabilities of

building financial IT infrastructure, but no payment aggregators exist in

the market. Introduction of payment aggregators would be beneficial for

the market, but on the flip-side, it’s also important to note that addition of

an aggregator also adds an additional cost component to the expenses.

An additional benefit to be derived from bridging of MFIs and MFS

providers is the consolidation of the KYC process – MFIs would then be

able to use their existing KYC on clients for MFS account opening and

eliminate the need for a new one.


Ecosystem development is key to ensuring consumers are habituated

One of the key challenges of DFS is that the ecosystem of merchants is

not yet developed in sync to the demand. Meaning, consumers are not

being able to spend digitally and are having to cash-out for any

foreseeable transactional needs. A focus by DFS providers on developing

the ecosystem of merchants will mean clients will be able to directly

spend their loans digitally, allowing MFIs to ramp up their digitization of

loan disbursement. Otherwise, the bottleneck of cash-out limit will keep

on hindering the disbursement process.

Greater advocacy for policy reform is needed

Collectively, MFIs and MFS providers are actively trying to advocate a

policy revision on the prohibitive cash-out limit. However, this reform may

take time as the MFS industry is relatively new to the country and

regulatory bodies will take stringent measures to ensure a proper

regulatory structure is in place as the industry grows.

Strengthen the digital ecosystem and address keyregulatory bottlenecks:

35

In order to assess the challenges with individual systems, MFIs need to

understand the customer pain points and address them periodically to

make the transition process much more smooth. Digitization of loan

collection and disbursement offers a solution for MFIs to curtail their high

operating costs and compete against commercial banks moving into rural

financial markets. However, this can only be achieved if borrowers are

habituated and satisfied with their services.


CONCLUSIONMicrofinance sector has experienced a steep growth curve since its

humble beginning back in the 1970s. Despite performing strongly in

terms of credit disbursement and loan repayment, a number of drivers

may cause a tectonic shift in the sector’s future growth trajectory.

Broad based economic development with resulting decline in absolute

poverty levels, may alter the nature of credit requirements from

traditional borrowers. Penetration of alternate banking channels such as

agent banking, will further complicate the competitive scenario.

The country’s graduation as a middle-income nation would also help

squeeze donor funding for MFIs. The MFIs must, therefore, find ways to

streamline operations, preferably using technology, with a view to

inculcating efficiency, ensuring transparency and reducing overhead

costs.

DFS based payment mechanism for loan disbursement and repayment

can potentially provide the impetus needed for optimizing the cost

structure. However, the sector must overcome certain challenges and

inertia for mainstreaming this initiative.

36


METHODOLOGYThe information given in the white paper was gathered by conducting

in-depth interviews of 17 industry professionals from top and mid-level

management from RDRS, SAJIDA Foundation, BRAC Bangladesh, BURO

Bangladesh and Shakti Foundation. The industry professionals are

engaged in transaction digitization piloting and have extensive experience

in the MFI industry. Additionally, 5 interviews were conducted of

professionals working in the development sector and the Microcredit

Regulatory Authority to gain further insights about the ecosystem. The

paper also contains referred content gathered through literature review

of relevant content published by development organizations, MFIs and

regulatory bodies. All referred content are cited throughout the report

and in the following endnotes.

37


38

ENDNOTES1. Microfinance Institutions are referred to as MFIs.

2. Mobile financial services are referred to as MFS.

3. Digital financial services are referred to as DFS.

4. ‘Field officer’ and ‘credit officer’ are terms used interchangeably throughout the report.

5. ‘Mobile money’ refers to both MFS and banking services that are available in a mobile app.

6. The Daily Star, 2018. Loans for farmers to be cheaper.

https://www.thedailystar.net/business/bangladesh-bank-determined-agriculture-loan-intere

st-rate-to-be-cheaper-1635829

7. The Daily Star, 2018. New policy to sheild farmers.

https://www.thedailystar.net/business/bangladesh-bank-low-interest-loans-for-agriculture-

new-policy-shield-farmers-1668949

8. Bangladesh Microfinance Statistics 2016-17, Credit and Development Forum,

http://ww.cdfbd.org/new/Bangladesh_Microfinance_Statistics_2016-17.pdf

9. Millennium development goals: Bangladesh progress report-2015, UNDP,

https://www.undp.org/content/undp/en/home/librarypage/mdg/mdg-reports/

asia-pacific.html

10. Pioneering Cashless Microfinance in Bangladesh, SAJIDA,

https://optixproject.org/briefs/pioneering-cashless-microfinance-in-bangladesh

11. Helix Institute, November 2015, “Digital Financial Services: Opportunities

12. BRAC, 2019. Bridging the gap in financial inclusion.

Available at: innovation.brac.net/wp-content/uploads/2019/03/Mobile-money-booklet.pdf

13. Alliance for Financial Inclusion, Digital Transformation of Microfinance and Digitization

of Microfinance Services to Deepen Financial Inclusion in Africa, 2018, https://www.afi-glob-

al.org/sites/default/files/publications/2018-08/AFI_AfPI_Special%20Report_AW_digital.pdf

Accessed on: 10.03.2019 for MFIs”, Nov. 2015

14. Women’s World Banking study, 2014,

https://www.womensworldbanking.org/wp-content/uploads/2014/03/WomensWorld-Bank

ing-A-BETA-Way-To-Save.pdf

15. Standard Digital, Mobile lenders drive microfinance entities to early grave, Jan 2019,

https://www.standardmedia.co.ke/article/2001309493/mobile-lenders-drive-microfinance-

entities-to-early-grave. Accessed on: 10.03.2019

16. Circular by the Microcredit Regulatory Authority (Bangladesh), 2010,

http://www.mra.gov.bd/images/mra_files/Circular/circularoninterestrate-english.pdf


ACKNOWLEDGEMENTSThis white paper would not have been possible without the support of Bill & Melinda Gates

Foundation. Along with the MFI professionals interviewed, we would like to thank the

following stakeholders for their valuable support:

Maria A. May, Program Officer, Financial Services for the Poor, Bill & Melinda

Gates Foundation

Shams Azad, General Manager, BRAC Microfinance

Moonmoon Shehrin, Deputy Manager, BRAC Microfinance

Md. Fazlul Hoque, Senior Director, Development Programs, SAJIDA Foundation

Tajwar Hoque, Coordinator, IT & Project Management, SAJIDA Foundation

Ashirul Amin, Senior Associate, BFA

Imran Ahmed, Senior Director, Head of Programs and Initiatives, SHAKTI-

Foundation for Disadvantaged Women

Mohammad Jakirul Islam, Country Programme Manager- Bangladesh,

MicroSave

Farmina Hossain, Deputy Director - Program, BURO Bangladesh

Mohammad Nur Hossain Siddique, Deputy Manager, Cashless Branch,

Integrated Development Program, BRAC

Tahmina Zabeen, Deputy Manager, BRAC

39


CONTRIBUTORS

40

CONTRIBUTORS

Rageeb Kibria

Senior Business Consultant & Project Manager

Zahedul Amin

Director, Finance, Strategy and Consulting Services

Zahed has a decade of experience in banking, inclusive business, private sector

development, consulting and entrepreneurship. He is passionate about startups,

tech based interventions and impact investment. Zahed loves reading. His interests

range from geo-politics to technology to economics to psychology.

Farhana Yasmin

Creative Design Manager

Farhana is a design aficionado. She loves to articulate her thoughts by designing

beautiful creatives. She has a knack for design thinking principles. Having a

background in computer science coupled with an inherent penchant for creative

illustrations, Farhana comes across as a well rounded UI/UX professional.

Rageeb has been working as a consultant for the past three years with a wide

berth of expertise in market research, financial services, data analytics and project

management. His work has benefitted clients such as BCG, PWC, The World Bank

Group, Ricardo Consulting, Axiata Ltd and British Council among others.

Specialized in business model development, financial structuring and inclusive

business design with 10+ years of experience in investment banking, private,

development and public sector consulting. Co-founder and CEO of LightCastle, one of

the country’s fastest growing consulting firm with 100+ projects in 3 years and social

ventures like www.pujeebd.org, www.unnoty.org and www.thepitchperfect.com.

Bijon Islam

Chief Executive Officer

Sayed MohammadMahbubul Islam

Associate Creative Designer

Specialized in content & data visualization, graphics design & logo design. A

budding artist and a freelance photographer have vast experience in making

infographics. Areas of expertise include Adobe Illustrator, Adobe Photoshop,

Adobe lightroom & other platforms. Currently studying Oriental Art, Faculty of

Fine Art, University of Dhaka.


Disclaimer:

All information contained herein is obtained by LightCastle from sources believed by it to be accurate and

reliable. Because of the possibility of human or mechanical error as well as other factors, however, all

information contained herein “As IS” without warranty of any kind.

LightCastle adopts all necessary measures so that the information it uses is of sufficient quality and from

sources LightCastle considers to be reliable including, when appropriate, independent third-party sources.

However, LightCastle is not an auditor and cannot in every instance independently verify or validate

information received in preparing publications.

LightCastle Partners

Floor 1, House 134, Road 3, Block A, Niketan

Gulshan 1, Dhaka 1212, Bangladesh

Email: [email protected]

Mobile: +88 01711 385988, +88 01747 353438

Web: www.lightcastlebd.com

Data on Demand Platform: databd.co

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